Friday, September 26, 2014

Corporate Tax Reform FAQs, from the NYS Tax Department

From HERE:

These FAQs are meant to provide general guidance on topics of interest to taxpayers. However, taxpayers should be aware that subsequent changes in the Tax Law or its interpretation may affect the accuracy of an FAQ. The information provided in these FAQs does not cover every situation and is not intended to replace the law or change its meaning.

Business Capital

Q. Does business capital include the capital that generates other exempt income?
A. Yes, because this capital may also generate taxable business income, such as capital gains from the sale of stock in a unitary corporation that is not included in a combined report with the taxpayer.

Q. Are Internal Revenue Code Section 78 gross-up dividends included in the business income base?
A. Our current policy of excluding these dividends is being continued. See NYS Tax Law section 208.9(a)(6).

Q. Will New York State consider a corporation instantly unitary with a taxpayer when acquired?
A. It is a facts and circumstances determination upon acquisition.

Q. Does corporate tax reform change the method for determining partnership income of a corporate partner?
A. No. The current aggregate theory approach where partnership items of receipts, income, gain, loss, and deduction flow through a partnership to a corporate partner as well as gains or losses from the sale of a partnership interest itself is continued.

Q. For purposes of determining nexus, is the $1 million or more in receipts within New York State test computed annually?New Posting
A. Yes.

Q. For purposes of determining nexus, is the $1 million or more in receipts within New York State test applied at the partnership level or the corporate partner level?
A. The test is determined by combining the general partner’s receipts in NY with the partnership’s receipts in NY.


Partnership A has 2 general partners: Partner B who owns 60% of the partnership and Partner C who owns 40%. Partnership A has $600,000 of receipts in NY. Separately, Partner B has $700,000 of receipts in NY and Partner C has $450,000 of receipts in NY.

For purposes of determining nexus only, both partners B and C would be treated as having $600,000 from the partnership. Combined with their own receipts, both general partners exceed $1 million in receipts in NY ($1,300,000 for Partner B and $1,050,000 for Partner C). Therefore, both general partners are subject to tax.

For more information see Corporate Tax Reform 2015

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